Moving? Don't forget to budget for these payments.

By Iona Bain

There are two types of insurance for your home: buildings and contents.

A mortgage lender will usually insist you have buildings insurance, which covers the structure of the property including fixtures and fittings.

Buildings insurance

This is meant to be a fail-safe in the event of fire or other damage to the property requiring repair or at worst rebuilding, so the policy must cover the rebuilding cost.  A standard policy covers fire, smoke, falling trees, extreme weather, a car or an aircraft hitting your home, and criminal damage due to vandalism or rioting. It will often also cover damage from burst pipes, and normally cover subsidence, providing there is no history of subsidence at the property.  Flood risk could be tricky if you are in a flood-prone area, and you will have to shop around.

Similarly, if your property is listed, or thatched, or unusual in some way, or even just a high-rise flat or ex-council property, be sure to declare all that when looking for a policy as not all insurers would cover you.

If you are a leaseholder, you will not be responsible for buildings insurance -the freeholder will.

In the event of a disaster, without buildings insurance you have a massive repair or reconstruction bill for your home, yet you would still be paying the mortgage on it.   

Contents insurance

This covers damage or loss of contents (such as furniture, possessions, jewellery) in the case of fire, theft or even stupid accidents. You do not have to take out contents insurance, but if you do, it’s important to cover items for the right value and follow other rules or the policy could disappoint you.

For instance, if a pipe burst your buildings cover would pay for fitted carpets as part of the house’s fixed equipment, but not rugs doing the same job – for that you would need contents insurance.

If you really don’t have many valuable possessions (or they are in storage elsewhere), you can easily afford to replace what you have. In that case, you really don’t need contents insurance and it could turn out to be a waste of money. It’s your call. If you need to insure a laptop or smartphone, a specialist policy works out cheaper but read the terms and conditions carefully.

Getting insured

You are usually responsible for the property as soon as the contracts are exchanged, so insurance should be in place as soon as the purchase of your property is completed.

How much you will pay depends on the property’s location, type and value, its security, how many people are living there, and who you are – as defined by your credit rating.

Website proposal forms will probably give you a rebuilding cost based on the information you input about the property. Or there is a free calculator at the Association of British Insurers.

If you want a contents policy, make a list of everything in your home. Under-insuring could lead to you getting short-changed in the event of a claim. Add up everything, including smaller items such as clothes, on a 'new-for-old' basis. Pay special attention to high-value items especially jewellery, as there are special provisions for insuring valuable stuff.

If you do take out a policy, remember your security (top of the range door locks and locks on all windows may be specified) and alarm system if you have one, and do not leave the property empty for more than 45 days.

Reducing the cost

When seeking quotes, it’s important to enter your requirements correctly – false information will invalidate any claim, however tempting it might be to see a premium reducing at the click of an entry.

However, you can legitimately reduce your premium by being prepared to pay a higher excess – the amount you pay out – in the event of a claim.

If your property does have any special features that might push up the price or limit the quotes you can get online, you may need an insurance broker to hunt down the best deal for you. Moving in can be stressful at times, as you wait to get your hands on the keys, it’s a good time to find out what you might need to know about the property! Here's an article that covers that!

Try and pay for your policy upfront. Agreeing to pay monthly is like taking out a loan, because many insurers will charge credit card-type interest rates, or worse, for lending it to you. Exceptions are First Direct and M&S Bank, which charge 0 per cent - but their price needs to be right as well. When you are focused on securing your mortgage, your property, and your completion, it’s easy to overlook the need to scrutinise any extra costs -especially unnecessary ones. If you need more advice on how to minimise these costs, read this. 

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